Edp Renovaveis Unsp/Adr

Welcome, everyone. Thank you for joining EDPR's first of 2025 results conference call. We are pleased to have you with us today, our CEO, Miguel Esposandrade, and our CFO, Rui Teixeira. They will walk us through the key financial highlights from the period and share insights into the full year outlook. After the presentation, we'll open the floor for questions. You are welcome to submit them via the conference chat or ask them directly over the phone. Section is scheduled to last approximately 60 minutes. With that, I will now hand over to Miguel Sotomayor to begin the presentation.

Thank you, Miguel. Good afternoon, everyone. It's good to catch up with you before many of you head off to some well-deserved holidays. So I'd start off by moving to slide four and talking about the first half, key highlights and numbers. So I think the first half was marked by a really solid evolution of the underlying EBITDA net profits. We're also on track to deliver the two gigawatts of capacity that we'd committed to. And the asset rotation plan is also proceeding as expected. In fact, we just announced a couple of hours ago an asset rotation in Greece. So another one. And we expect a couple more over the next couple of days and weeks. And that's all aligned with our 2025 year-end targets. Overall, installed capacity grew to almost 20 gigawatts, up 18% year-on-year, so that's thanks to the net additions of 3 gigawatts. We got a 12% year-on-year increase in generation, so reaching over 21 terawatt hours. And here we've done a lot of work on our volume projections and modeling, and I think just increased confidence in the ability to estimate the projections. So I think we're feeling good about this. In terms of average selling price, it's standing at 55 euros per megawatt hour, down 9% year on year. That's mainly due to lower prices in Europe and South America, but then partially offset by stronger pricing in North America. One point I really wanted to highlight is the fact that our adjusted core OPEX per average megawatt an operation improved by 11% year to date, reflecting an ongoing focus on operational efficiency. So here you can see the economies of scale really beginning to kick in. The solar, the factory have obviously more megawatts and keeping the cost on a nominal basis really under strict control. On the financials, recurring EBITDA at around 960 million euros, so flat year-on-year. However, excluding asset rotation gains, the underlying EBITDA grew by around 20% year-on-year. Recurring net profit coming in at around 137 million, which includes... or 132 million excluding asset rotation gains, and that's an 80 million euro increase year on year. So strong operational results, good execution, good financial discipline, I think positioning us well to meet our 2025 objectives. So let's talk about some of our key markets and highlights on what's happened over the last couple of months. If we turn to slide five, let's talk about the U.S., So first we see robust demand outlook for power and renewals. I think this is undeniable. You'll see it everywhere. I mean, a lot has been written about it. And I mean, just to give you sort of a couple of data points, but it's projected around 70% increase in the US power demand by 2015. And the other thing, so apart from this increased demand that we expect over the next couple of years and even decades, we now have much more clarity on the market conditions following the one big, beautiful bill that's being approved by Congress and Senate and signed into law by President Trump. At the end of all of this process, we continue to see strong fundamentals to capitalize on the opportunities ahead. I think we continue to believe strongly that renewables remains the most competitive source of power and that it's the only technology that is really ready to connect at scale today. certainly over the next couple of years as well, to meet this demand. I'm sure we can then go into more debate about nuclear and coal and gas. But the truth is, as of today and over the next couple of years, renewables is really what can provide or supply a lot of power to this market. This market demand is coming through in pricing dynamics. We are seeing high demand for near-term connection projects and also for longer-term contracts with a trend towards increasing demand the appetite for 20-year contracts, so indicating market views on long-term energy pricing. In terms of prices, high prices on the back of this increased demand and lack of short-term, near-term supply. And just one data point, for example, here, we saw the PJM capacity auction prices be cleared at the cap of $329 per megawatt day for the 26-27 period, and that compares to $270 for the previous period, 25-26. On the bill, the one big, beautiful bill, it's brought clarity to the tax credit structure. I think most of you will be familiar with that. So now the new framework is in place. There's no change to the adders, no changes to the storage tax credits. We have coverage for tax credits until December 2027 without further start of construction or safe harbor limitations. And we are expecting some revised guidance on start of construction under the new law now in mid-August following the executive order from July 7th, but hopefully we'll be able to get some more information on that over the next couple of weeks. But all in all, we are well positioned in this landscape with 26 and 27 capacity, basically, or the ability to have this capacity secured under the bill and with existing safe harbor capacity. So we have about 1.5 gigawatts of solar and wind capacity under the old legislation as of December 2024, and that can be placed in service until December 2028. And then post-2028, we are currently working to secure additional safe harbor capacity, potentially all the way through to 2030. So clearly things have moved on since we last spoke at the last call, and we now have pretty good visibility, I'd say, until 2030, and we expect to firm that up over the next couple of weeks. Clearly something we'll come back to in the third quarter numbers and CMD. But I'd say next couple of years, we have this visibility on growth. On storage, no need for safe harboring. Tax credits are protected well through till 2030 and beyond. And this will continue to play a significant role in our growth in the US. And as you know, with very good, typically double digits returns. We think that the utilities will have to fulfill the capacity needs with storage in the near term, and so we're in a good position to capitalize on this with our robust pipeline. Finally, but not at all unimportant, we have limited impact from import duties and tariffs because, as you know, we have a mostly U.S.-based supply chain set up since 2022-2023. So we had issues back with laundry panels in that period. we redirected our supply chain basically into the US. So in terms of solar panels and trackers, inverters and all of that. So we really have mitigated significantly our supply chain risk from tariffs. And now with this, from these most recent sort of tariffs. So that's on the US. On slide six, we can talk about Europe. And here are a couple of points. First, European Commission is actively working promoting grid reforms, and looking also at industrial resilience and competitiveness. And I've had the opportunity to spend some time in Brussels talking to some of the key people there, and it's very clear the drive for energy security, competitiveness, and that comes through in this continued promotion and defense of grids and renewables. Two public consultations recently launched to address these challenges, aiming to ease bottlenecks, accelerate permitting processes, enhance cross-border planning. We've also seen the publication of the Net Zero Industry Act to boost competitiveness and the resilience across Europe. One of the measures in this act refers to having at least 30% of the renewable energy auctioned annually in each member state, meeting non-price criteria. And all of this designed to strengthen Europe's industrial base and economic security. Still on this point, And interesting to see the European Commission is also monitoring the actual implementation of a lot of the measures that they've defined over the last couple of years. So for an example, they launched infringement procedures against all member states except Denmark because most countries hadn't transposed the revised renewable energy directive by the deadline. So you've now seen the European Commission really putting pressure on the member states to actually transpose and get moving with a lot of the stuff that had been defined at the Brussels level. Regarding batteries in Europe, as you know, we've definitely seen a big push for batteries in the US. We've seen them in the UK. In Europe, we hadn't seen so far. What I'd say is that certainly now in 2025, we are seeing unprecedented daily price spreads. Now, these spreads... are a sustained increase in relation to the power prices. And we're seeing renewables putting a significant downward pressure on the central hours of the day, with solar driving prices sometimes to zero or even negative prices. And at the same time, we're seeing higher prices during the evening hours, driven typically by the marginal price of gas. So this is a great situation for assets with flexible capabilities and a strong signal for the energy arbitrage business case. We've been holding back from investments on batteries over the last couple of years. I think we believe that over the next month, years, there will be an increased focus on promoting batteries in several countries. And we've seen, for example, in Poland recently, and also we expect some auctions in Spain, that there will be further opportunities, for example, in batteries. Just as a sort of interesting data point, you can see there on the slide, capacity awarded 15 gigawatts expected in 2025 versus 13 gigawatts in 2024. So we're already talking about quite relevant numbers. So overall, you're taking important steps to have a more resilient and sustainable energy system. Slide seven, and I'll go quickly through the next couple of slides. So on slide seven, it's basically talking about our capacity expansion plans for 2025 and beyond, well, essentially 2026. We're on track for the two gigawatts, as I mentioned. Around 70% of that capacity is expected in the fourth quarter. The additions are progressing on time and on budget. So we have good line of sight to them. Looking to 2026, we have good visibility on up to one and a half gigawatts of capacity additions. Around 65% is already secured. And we have additional capacity under advanced negotiations with good opportunities in both US and Europe. So we're talking about megawatts that are really in the final, final stages. of negotiations. So we hope to give you some visibility on that soon. Secure projects, they're expected to deliver returns above our target risk return threshold. So around 270 basis points above WAC. And I think that just confirms the strength of our pipeline and also our capital allocation discipline. Overall, 85% of the 2026 pipeline is concentrated in the US and in Europe. And as I've said before, this really re-focusing our focus reinforcing our focus on our core markets. If you look at slide eight, asset rotations, again, I think here, relatively positive news. We're advancing this plan with around 0.7 billion of the targeted proceeds already signed or closed at good multiples. We had one transaction in Spain already closed, three more signed, including the transaction signed today in Greece, three additional deals that are currently under binding bids, and we expect those will come out over the next couple of weeks. The enterprise value per megawatt across these transactions, average values of around one and a half million euros per megawatt. So showing good, strong market demand. As you know, typically, I've talked about it's important to have demand and then it's important to have good prices. And I think we're seeing both of those processes with robust number of parties participating in the non-bindings and binding offers. So I think that's holding up quite well in 2025. Overall, we're expecting the 2025 transactions to generate around 100 million of gains, thereabouts. But half of the volume of the asset rotation will be executed at a 49% stake. And most of these proceeds are expected to be recognized in the second half of 2025, obviously. So you'll see that coming through and impacting the net debt also towards the end of the year. On slide nine, talking about investments. So we have been very disciplined on our investments. They're about 1.1 billion, around a 25% decrease versus the one and a half invested in 2024, but obviously also doing fewer megawatts this year versus last year. Despite the reduction, the investments are highly focused, as I mentioned earlier, at 90%, in this case, allocated to core markets in North America and Europe. And if we break this down by technologies, we have around a third of the investments going towards solar utility scale. Of that, 47% in the US, 38% in Europe, primarily Spain, Italy, and Germany. Then we have around 31% on wind onshore projects across the US, Europe, mostly Italy, Spain, and Greece, and then also some Brazil. 20% of the investment towards storage, mostly in the US, around 300 megawatts of storage capacity under construction. Around 9% for offshore wind, mostly the French projects, which are under advanced construction, and around 6% of just targeted solar DG with investments concentrated mostly in the US and in Singapore. So this investment profile really reflects our commitment to the core geographies, but also having a diversified technology portfolio, but of mature technologies. Let's talk about efficiency. And I think this is also one of the positives that we can really highlight here in this first half. So we're continuing our trend of improved operational efficiency. We'd already showed that in previous quarters, and I think this quarter is not an exception. We're delivering an 11% reduction in adjusted core OPEX per average megawatt. This is driven by essentially three things. One is just general cost discipline and very targeted efficiency measures and improving streamlined processes just across the organization. And I think the whole organization has responded very well towards this. We are, the second point is also a much leaner workforce model. So as I mentioned last year, we did a very deep internal reorganization aligned with our revised growth outlook, but also trying to really eliminate a lot of, well, any areas that could have either duplications or redundancies. And so we have a much leaner workforce model and we continue to work on that. And I think we still see some additional potential for efficiency. The third point is on the AI driven initiatives. as we go on optimizing operations and digitalizing a lot of the processes, we are also managing to just become more productive and get those economies of scale. In terms of headcount, so it's obviously optimized down to around 2,880 people. We are obviously ensuring we retain our top talent and best performance, and that's been a key driver for us and certainly a key priority for us. Overall, I think I just wanted to really highlight this commitment to operational excellence and cost efficiency and productivity, and making sure we stay competitive and agile in this fast-changing energy landscape. In terms of guidance, and just before I turn it over to Hui, so we are targeting, as I said, the 2 gigawatts for the full year. We had about 0.4 gigawatts in the first half, but I think I've already guided earlier in previous quarters that most of this would then be coming in the fourth quarter. The full year recurring EBITDA is expected to be around 1.9 billion, including the 0.1 billion in asset rotation gains, and having generation in the range of 41 to 43 terawatt hours. I think we're quite comfortable this year with this. Last year, I think we were a little bit off, but I'd say this year we've really gone deep on this topic of the volumes and feel much more confident. By mid-year, we've also already achieved a billion of asset rotations. Net debt projected to be about eight billion by year end, including two billion of asset rotation proceeds and a billion in tax equity proceeds. And so as of the first half, the net debt was at nine billion. But as I mentioned earlier, proceeds are expected to have come in mostly in the second half of the year. So we should see that convergence from the nine down to the eight billion of net debt. So overall, EDPR firmly on track to meet its 2025 guidance and very much supported by a very disciplined execution on both the investments and on the operational side. With that, I'd stop there and turn it over to Rui. Thank you.

Thank you very much, Miguel. Good afternoon. So let's move into the first half results and starting with page 13, really solid operational performance. So in the first six months, It was driven significantly by improving across all the generation metrics. So, salt capacity increased by 18% year-on-year, reaching 19.6 gigawatt, up from 16.6 gigawatt in the first half of 2024. So, this growth was supported by good contributions from North America, Brazil, Italy, and Spain. Asset rotation activities and decommissioning contributed to the portfolio as it ends by the end of June. So as of June 2025, 2.3 gigawatt of capacity is under construction for projects in 2025, but as well in 2026. Electricity generation rose by 12% year-on-year from 18.9 terawatt hours in the first half of 2024 to 21.2 terawatt hours in the first half of 2025. Operational efficiency has also improved, as Miguel highlighted, lower electricity losses and the renewable resource at 99%, just slightly below the 100% recorded in the first half of 24, with North America performing above average, helping to offset lower resource levels in Europe. So if we move now to slide 14, EDPR recorded a 2% year-on-year increase in electricity sales in the first half of 2025, driven by strong growth in generation, partially offset by lower average selling prices. The average realized selling price declined by 9% year-on-year, from about €60 per MWh to around €55 per MWh, but this was fully compensated by the 12% increase in clean power generation. This average price evolution was mainly due to Europe and South America, while North America saw a slight price increase from new projects in operation, as well as merchant exposure. So overall, a positive sales performance and showcasing the strength of our diversified portfolio. If we move now to slide 15, underlying recurring EBITDA increased by 159 million euros year-on-year, representing a 20% growth, excluding asset rotation gains, and a 1% year-on-year, excluding FX impacts. And this is driven by around 219 million euros of tax equity revenues from North America. That's an 18% increase in generation and new capacity additions that is driving this addition in revenues. 12 million of capital gains from the asset rotation closed in Spain as planned with the remaining gains concentrated in the second half of this year. Around 384 million core OPEX in line with last year's number. on the back of strong efforts in constant efficiency improvements, and about 50 million of less net other costs that improved around 60 million a year on the back of no material impacts this year from Colombia nor Romania versus last year additional costs. These results highlight the improvement in the underlying business from both operational growth as well as the enhanced efficiency. If we now go to slide 16, On the first half of this year, the financial results rose by 21 million year-on-year, reaching 244 million. This is primarily due to a 1.7 billion increase in nominal financial debt and also lower capitalized interest or financial expenses, and partially offset by effects in derivatives. A key strength of the financial structure is that 74% of EDPR's debt is at the fixed rate and therefore protecting against interest rate volatility. We also maintain a robust debt maturity profile with 57% of our debt mainly or effectively maturing beyond 2028. And of course, also this reinforced the long-term financial stability. And finally, our currency exposure remains well diversified, with 47% of debt in euro and 35% in US dollar. And therefore, we have a natural hedge against forex fluctuations. So on slide 17, and looking to the cash flow evolution, that I think is definitely a very positive one. In the first half of 25, organic cash flow reached 195 million euros, marking a 0.2 billion year-on-year increase. It's a solid performance of the operating portfolio, as well as changes in working capital and distributions to minority interests and tax equity partnerships. Just please note that organic cash flow excludes tax equity cash proceeds. These are typically received when the project is commissioned and have an immediate impact on net debt. So in the first half, we received 132 million of the tax equity cash proceeds, And we remain on track to reach 1 billion for the full year. And this is aiming, of course, we are aiming to have this cash in towards the end of the year. So as of June 2025, net debt stood at 9 billion. This is about 0.7 billion since December of last year. The increase is mainly driven by 1.3 billion in net expansion investments supporting our growth. This was partly offset by asset rotation proceeds, primarily from the transactions that were already closed, as I explained. Looking ahead, we expect net debt to converge to around 8 billion by year-end. Again, as Miguel said, timing of asset rotation proceeds, what I just mentioned about tax equity cash proceeds, which will be concentrated in the second half of the year. So if we now move to slide 18, so as mentioned earlier, our recurring underlying EBITDA rose by 159 million year-on-year, and this is reflected immediately into the net profit. Depreciation increased driven by the new capacity additions and the one-off impact from accelerated depreciation of repowering wind farm in US, something that we already explained in the first quarter. The effective tax rate normalized at 29%, slightly above the previous quarters. And this is because given the absence of tax benefits coming from asset rotation gains, effectively the tax rate is applied to the operational results from EBITDA. Minorities contributed positively year on year following the completion of the CDG minorities buyback in late 24. As you know, this is an important step in optimizing the portfolio and reinforcing the long-term value creation for all the shareholders. Regarding the one-off impacts at net profit level, just to mention there are about 30 million that we recognize this quarter. approximately 11 million coming from ocean winds in the US, given a contract or some contract cancellations that happened at South Coast Wind Project. And this relates to equipment supplier that were, the contract was canceled. And 15 million related to a portion of outdated equipment that we have in US and will not be using it in future projects. So all in all, recurring net profit reached 137 million, excluding capital gains. This represents a threefold increase versus last year. So really a very good performance on the underlying asset base. So now, Miguel, back to you for closing remarks. Thank you.

Thank you, Rui. So just a couple of points. First, strong first half of 2025, as I mentioned, delivering on the strategy. Confident in our development. Two gigawatt capacity additions target for the year on time and on budget. And already with the gigawatt of capacity secured for 2026 and looking to close some additional megawatts over the next couple of weeks. Financial foundation solid. Recurring EBITDA excluding asset rotation gains up 20% year-on-year. Recurring net profit almost tripling year-on-year. Strong organic cash flow. So clearly on track to meet full year guidance. U.S. energy market accelerating, driven by rising demand and need for new capacity. Renewables are an important part of this, no matter what people might say, and EDPR is well positioned in this market context. The asset rotation program is progressing with high visibility, one transaction closed, several signed, others under binding bids, all led to attractive valuations, and we expect around $2 billion in proceeds during the second half of the year, so supporting our $8 billion debt guidance. And so as we enter the second part of the year, I think we are, as I mentioned, on track to deliver the 25 targets. Good visibility, good execution, resilient growth strategy, and I think overall a good set of numbers. So I think I'd just also like to thank the teams for contributing to these numbers this first half. I'd stop there and pass it over to Q&A. Thank you.

Thank you, ladies and gentlemen. The Q&A session starts now. As a reminder, if you wish to ask a question, please press star followed by five on your telephone keypad.

Thank you. So the first question that we have comes from the line of Pedro Alves from Cashabank BP. Please go ahead.

Hi. Thank you for the presentation. Two questions, please. The first one on the US. So you have reiterated the above 1.5 gigawatts of safe harbored. But this is as of December 2024. Can you give us some comfort here in terms of a minimum reasonable figure on top of this 1.5 gigawatts that could be safe harbored? And if you have any idea of what could be the additional restrictions for the safe harbor criteria required by the executive order that was signed after the bill? And the second question on the capacity additions for 2026. So roughly two thirds already secured. How much do you expect to have secured by the next results presentation or the CMD? And if you can tell us the average or a range of the PPA prices by geographies that you are, that you have been able to sign and the ones that you are negotiating. Thank you.

Okay. Thank you. So let me just try and break it down. So until 2027, essentially, if we start construction on a new product, so for 25, obviously, there's no issue. For 26, as long as we start construction and finish it before 27, there's not a problem. And the same thing for projects that we start that we can complete in 27. So the 1.5 gigawatts, basically, we can pretty much use up either in 27 if we wanted to, but in 28 mostly. For additional... safe harbor beyond 2028. That's obviously something we'll come back to in the CMD. I think we can talk about that, but I think it's, let's say we have already quite a few options which would give us comfort on 29 and 2030. We obviously want to make sure, we want to see the safe harbor criteria that comes out in August. We believe there are years and years of precedent about what it takes to safe harbor projects. There are essentially two different ways of doing that. But one is just by having 5% already committed of CapEx for specific projects, and others by having sort of bespoke equipment already ordered for specific projects. Let's just wait and see. So I'd say that we have a couple of gigawatts beyond 2028. that we believe will be eligible, but obviously we want to see the final regulation that comes out before we comment publicly on that. On the capacity additions, and so 2026, I mean, we've got one gigawatt already secure for 26. As we say here, we think we can go up to, you know, one and a half gigawatts in 26. We've got about a half a gigawatt still, I'd say in the final, final stages of negotiation, but obviously I don't want to, commit to that before we actually close. But I'd say good confidence on that. And certainly by the next quarter, we would give you full visibility on the 2026 capacity because by then we would have to have it not just secured, but it would probably be already beginning construction at that point. In terms of PPA prices, I don't have it broken down by all the different geographies, but I think in the US, we're typically sort of in the 70s. that type of range, dollars per megawatt hour. In Europe, it will depend what geography you're in. If you're in Poland, it will be obviously higher. If you're in Spain, it will be lower. But this is certainly a lot of information, detailed information we can get to then in the CMD, and we'll put a pack together that we can share with you. But maybe for the moment, I'll leave it at that.

Thank you, Pedro. The next question comes from the line of Fernando Garcia from RBC. Fernando, please go ahead.

Good afternoon and thank you for taking my questions. I have as well two. The first question, clearly there was a recent recovery in the stock price, but GDPR is still trading below book value. So in a scenario of GDPR meeting asset rotation and tax equity targets, and as well your net debt of around 8 billion for year 25. I would like to know your thoughts in terms of growth going forward versus other capital allocation options such as survey banks. That was the first question. The second question about asset rotation, I will appreciate an indication about how you see valuations at the moment. And when you expect to finish the disposal of assets, let's say affected by higher capital costs and evolution, that you expect in terms of enterprise value, investor capital multiple going forward.

Thank you. Okay. So in relation to your first point, I'd say two things. First, we continue to see good organic opportunities for growth or, you know, projects with high single, you know, high, either high single digit or even double digit returns. So I think those are good areas to allocate capital, but obviously they're also focused on deleveraging. And so we want to make sure that we get the EDPR balance sheet with the ratios that we would like before we then think about additional areas of capital allocation, like you mentioned, of share buybacks or anything else. So I'd say deleverage is a key priority, continue to execute on our growth plan, another priority. And then I think we think about whether they're, well, depending on what the share price is at the time, whether it makes sense to think about share buybacks, but it's not something that is imminent. In terms of asset rotations. So I think if your question is, are we seeing... in terms of multiples i mean normally what we aim for is npv of our capex sort of targets to be around 20 percent of value creation um certainly we had many years where that was true i think we're now in in an area where we are rotating some vintage projects with slightly higher capex numbers so slightly smaller capital gains but the multiples are actually quite good and so if you look at the multiples that are coming through whether it's the greek projects or if it's uh I mean, as I say, we'll talk about some of the other projects, portfolios, hopefully that we'll be communicating over the next couple of weeks, but all with, I think, strong multiples that if you do the read across, whether it's in the US or in Europe, you know, Spain, Italy, France, Greece, you'll see that those are all very attractive multiples. And I think we'll have an important impact on the read across to the remaining portfolio. Yeah. I don't know if we, or Miguel, if you want to complement anything else.

No, no, I would say this. So 2025 transactions, as we have been highlighting, are likely to only give around 100 million of capital gains, also bearing in mind that some of the transactions, namely US, will be probably minority sales, so no capital gains on that. But yes, within those portfolios, we are including projects from 21, 22 FIDs that in the meantime was caught up by CapEx overruns. So that's why we are expecting low contribution from capital gains while, I mean, the multiples are actually good. So it's a fair value transaction.

Thank you, Fernando. So the next question comes from the line of Arthur Sittman from Morgan Stanley. Arthur, please go ahead.

Hello. Thank you for taking my questions. So they are both on the U.S. and on your growth pace, basically. The first one is just that the U.S., I think, accounts historically for 30% to 50% of your growth additions every year. And so when I look at your quantity of gigawatts safe harbored for the coming three years, 1.5 gigawatts, I was wondering if that means that essentially if we gross that out with the ratio, the 30% to 50% ratio, does that mean that it's going to be a bit difficult to grow for those three years by more than three to four, maybe maximum five gigawatts of gross addition over those three years? Or if that's not the case, then where else would the growth come from? That's the first question. The second one is just on the executive order on renewables and what you expect around mid-August. I was just wondering if you could describe a bit the scenarios here. I imagine the best outcome would be that nothing changes and then you can safe harbor as much as possible. But what would be quite a tough scenario for you And what could that mean for your growth? Could it be to an extreme where you cannot safe harbor anything? Yeah, I'd be interested to have some thoughts around that. Thank you very much.

Sure. So Arthur, good questions. Just taking a step back and making sure I'm clear. If we build projects, if we place them into service before 2027, end of 27, we don't need to safe harbor. Effectively, they will get the tax credits. So 25, 26, and 27 are safe. We can build as many megawatts as we want as long as we place them into service. They will be eligible for the tax credits. The one and a half gigawatts, essentially in the limit, we could use them just for 2028 because that's when they expire. And then we're working on is the safe harboring for projects beyond 2028. So that's important when we think about the number of megawatts that we could potentially do in the US and about the overall number of megawatts. So I think we have more than enough buffer to basically do a relevant number of megawatts in the US. I mean, certainly in line. I don't want to anticipate myself in terms of what we're going to then be communicating in the capital markets day. But let's just put it that certainly you can't do that math that you just did. It can be certainly much more than just a one and a half growth stop. The second point is that storage doesn't require safe harboring because the tax credits run all the way past 2030. And that's also a significant percentage of growth that we've seen not just in the past currently, but also going forward. So I think that's on top of the safe harboring numbers that we would have for solar and wind. On your second point, which is executive order in August and what we expect, I think here it's really a question about the cost of the safe harboring. Because as I mentioned, if you do it, it's a very low cost option, which is just ordering, let's say, a transformer, a main power transformer, the cost per megawatt can be very limited. So you just place an order for a transformer, And that's enough to get you the safe harboring. In other cases, and that's typically what we've done, you safe harbor, let's say five, you start of construction of 5% of the value, whether it's in panels or some other equipment, and that is enough to get you the safe harbor. This is a more prudent approach than many of the peers. I'd say it's significantly more prudent than many of the peers. It's been the precedent for many, many years that this has been enough to safe harbor. And so, If we keep with precedent of previous years, we should be fine. If there is any change to that, then we just need to look at it, see what the cost of additional safe harboring is, and then take a position on whether we want to take on that cost of options or not. But I don't want to speculate too much of that at this point.

Thank you. And just to be clear on the definition of the 1.5 gigawatts that are safe harbored. So based on your comment, should I understand that this is just wind and solar, 1.5 gigawatts just of wind and solar? And on top of that, does that include any of the capacity that you intend to add in 2026?

No, no, that's the point. So anything that we add in 2026, we don't need to use up that one and a half gigawatts. which, by the way, is just for wind and solar. So batteries doesn't require safe harboring. So we have flexibility. Basically, any capacity we place into service in 25, 26, and 27 won't consume, won't use up that one and a half gigawatts of safe harbor that we already have.

Is that clear? Thank you very much. Yeah.

Okay, thanks. Thank you.

The next question comes from the line of Alberto Gandolfi from Goldman Sachs. Alberto, please go ahead.

Hi, good afternoon. Thank you for taking my questions. The first one is long and a bit elaborate, hopefully clear. I noticed three things, in my opinion, seem to be happening here. Asset rotation gains are really plummeting. I mean, you're selling 2 billion euros, but you're guiding for 100 million. So I wonder how central this strategy might be going forward. The second thing, Miguel, you just mentioned that you're seeing high single digit and in some cases low double digit returns on projects, which seems to be an upgrade versus history. And the balance sheet is indeed deleveraging once you reach your 8 billion year end net debt target. So on this basis, do you contemplate, so I'm not asking you to announce it now, but in your mindset over 26, 28 years, Is your philosophy going to include a return of capital to shareholders as well as organic growth? Or will you just focus on organic growth and asset rotation? So I'm trying to understand if I buy the stock now, am I going to expect a dividend coming back? And most of all, am I going to expect you to come in and put the floor on the shares with a buyback, which has been extremely successful in many cases in the sector, in other instances? The second question is on guidance. You talk about 1.9 billion EBITDA with 100 million gains. Can you tell us, please, in the second half, how much EBITDA growth you expect from additions and how much EBITDA deconsolidation from disposals? Because it seems to me that you're kind of guiding for a slowdown in H2 versus H1, which I don't quite fully understand. So I'm trying to understand if it's the prudent guidance or if there's maybe more deconsolidation versus what I thought. And if you could, maybe last comment, we've seen three very important data center deals, you know, Solaria, well, in the press today, Iberdrola, HLON, RWE, AWS. Can I ask you if there's something EDPR is doing, or perhaps it's more for the EDP call, this question? Thank you so much.

Thank you, Alberto. So in your first point, So just a couple of clarifications. You talk about the $2 billion of asset rotation and the $100 million of capital gains. But bear in mind that about half of that, we're only selling 49% of the significant portfolio. So the capital gains on that would never flow through the P&L in any case. So you can't just do the 0.1 over the 2. You should do more approximate would be the 0.1 over 1. in terms of the capital gains per megawatt or per euros of investment. The second is that we are focusing on also selling projects that had higher capex numbers. And so getting those, let's call them vintage projects, out the door so they can really focus on good assets that have recurring, you know, strong recurring growth of earnings going forward. Finally, on this point, I think our objective is to create value, long-term value. And that means making good investments in good projects. And that's our focus. I'm not going to comment or speculate on share buybacks. And I think you have to see that in the context of what are you comparing it against? What's the opportunity cost of continuing to develop our business and developing new projects. And so that's what we'll be looking at. And at any point in time, if, you know, we will be allocating capital in the most efficient way possible, but obviously we are focused on taking these long-term investment decisions on projects that we think create substantial value. On guidance. So I wouldn't expect anybody EBITDA growth coming from new additions. I think most of the additions will come through towards the end of the year. And so let's say that I wouldn't factor that in as a driver. And a lot of the divestments will also come towards the end of the year. So you should assume a relatively steady state in the second half. I'm not going to comment whether it's conservative or not. But I would just say that the new additions or the divestments are not going to have a material impact on the estimate that we have for the second part of the year. Finally, on the data centers, listen, we, our main clients are the big tech and they are the data centers. So we sign contracts with them, you know, on a very, very regular basis. Maybe we can talk to our marketing team to see if we give even more visibility to our let's say, the customers that we interact with. But by definition, a lot of the corporates that we are signing contracts with and that we are signing these PPAs with are using it for AI, they're using it for the data. So listen, I think that's a huge source of demand for the market in general and for us in particular. But I certainly think that we're very much on top of that and we have, I think, good, strong relationships with whether it's the Amazons, the Microsofts, the Googles, the Apples, I mean, all of these guys. And a lot of the others. I mean, in some cases, we'll do it as utility scale. In other cases, we'll do it as distributed generation, sort of behind the meter. But definitely, it's something that we are taking advantage of.

Thank you. Thank you, Alberto. The next question comes from Lionel of DEPA. from Bernstein.

Hi, this is Deepa Venkatesh from Bernstein. I had three questions. The first one is on US PPA trends. Would you be able to elaborate what you're seeing in the past three months or so? I mean, it's more the trend. And do you see some of those PJM auction prices kind of also being reflected in higher PPA offtake prices for renewables? And is there a willingness in the PPA contracts to take any kind of tariff risk or maybe any place in service date risk or anything? So that's the first question. Second one on the asset rotation market, again, could you give us some color on how you're seeing the market now versus three months back or six months back, both in terms of number of buyers and the valuation? Is it improving? And then lastly, would there be any specific points you would want to highlight about the CMD in November, any key areas of focus? I believe you already mentioned that you want to give more granularity on PPA pricing, but anything else just as a sneak preview? Thank you.

Okay, thanks. So on the first point, what I'd say is we're seeing still strong demand, and so the PPA price is staying fairly stable in the markets that we're in. So, you know, That's positive. I mean, we've seen people reaching out to us and sort of, you know, us being able to have pretty strong negotiating positions on these PPA conditions in general. So not just price, but as you mentioned, taking on tariff risk, taking on place and service risk, you know, having buffers between COD and sort of PPA starting prices. So I think in general, people want short-term projects. Utilities are good. are definitely also looking, for example, for batteries and capacity. So I think that's, I just reinforce that we are seeing strong demand, and that is driving, obviously, the dynamics of the rest of the market. On the asset rotation, again, strong demand. I can tell you that in Europe, in the various different markets, whether it's Spain, Italy, France, Greece, or even in the US, we've seen very robust number of participants, and we've been positively surprised by the competitiveness of the proposals that they've made, both at the non-binding and at the binding level. So I'll leave it at that. I mean, you'll see sort of the multiples that are coming out of those transactions as we go on announcing them. But what I'd say is that every year we have the discussion at the beginning of the year where the market skeptical about the asset rotations and whether the demand will be there or not. I think 2025 will again demonstrate that we are able to rotate assets successfully and have good counterparts and good multiples. And on both sides of the Atlantic in this case. In relation to the CMD, I mean, again, I don't want to sort of anticipate a lot of things, but I think what you can expect is Delivering the current plan. I mean, that's for sure. Looking out beyond 2026 at these dynamics, now that we have visibility on the U.S. And, you know, as soon as we get this additional data point in August, I think we'll have even, you know, really be able in a good position to give you guidance on what we've managed to safe harbor, what we think is our capacity growth for the next couple of years in the U.S., That's also true in Europe. It's true in APAC and in Brazil. So we'll be able to give you much more comfort and, I think, confidence on the growth past 2028, past 2026, rather. Talking about efficiency and the productivity and the economies of scale that we're seeing, I think you've seen a flavor of that in this presentation and some of the previous presentations. I think we can continue to go deeper there and we can tell you about how we see that evolving. So, I'd say that's really sort of the key issue. But ultimately, at the end of the day, it's how we can continue to grow the business profitably and create value. And I think that's what we'll show you at the CMD.

Thank you.

Thank you. So, the next question comes from the line of Manel Paloma from the NP. Manel, please go ahead.

Hello, good afternoon, everyone. I have still a couple of questions. The first one is on the asset rotation plans in the short term. One of the things that you're planning is to do the rotation of a minority stake in a large portfolio of assets. I wonder whether you could provide a bit of a rationale for selling a minority stake instead of 100% of assets as before. That was the first one. Secondly, I'd like to ask you a bit about the detail on the one-offs in this first half. If I'm not wrong, it's a 44 million impact that comes both from ocean winds and repowering. I wonder whether you could give us a split. Secondly, whether you could tell us what is left for that repowering. And also, following with the repowering, I wanted to ask you whether you have any view, any idea about the run rate of assets to be repowered on a yearly basis in the coming years. Thank you very much.

Thank you, Manel. So on the first question, the rationale is the structure is what optimizes our balance sheet. And so by selling a minority stake in the US, because we have a very healthy FFO in the first couple of years, by selling a 49% stake, and certainly for the purposes of ratios and credit rating agencies, it's better to sell a minority stake and keep consolidating 100% of the EBITDA and the FFO rather than selling the full portfolio. So that's certainly one of the key considerations there. The second is it was an attractive structure that the investors, these are typically financial investors that are looking at this that they feel comfortable with. But I'd say certainly we looked at a majority stake and this structure of selling 49% stake ends up optimizing the the balance sheet ratios. And so we thought that that was the best, you know, the best option. On the second point, so maybe we can then elaborate a little bit more here, but on the repairing, so that's, I don't have the exact split. I can take it.

I can take this one. Thank you, Miguel. Hi, Manuel. So just step by step. So at net profit in Q1, we had already recorded $14 million. of this repower activity in the US. Again, just to be precise, as we move to repowering, the components that we are replacing and that are not yet fully depreciated, we basically have to write it off according to a calendar. And that calendar typically follows a sort of a construction period of the new plant being built effectively. So I would say that this is like I mean, we expect this to slightly increase throughout the year for this specific asset because the COD is for 2026. And therefore, I would say, you know, this quarter should have been about I mean, a little bit. But yeah, you should expect some small increase. Maybe it's around two million or so. But that's that's it. So the bulk has already been done in Q1. Now, what was addition this year, or this quarter, a $30 million, has also to do with ocean winds. So it's about $11 million from ocean winds, because there were some contracts in place for the south coast wind. And even beyond the four-year delay impairment that we did last year, at some point we decided that The cost of delaying those contracts would probably wouldn't make sense. And therefore, we decided to cancel. There were some cancellation fees. That's basically the 11 million. And then there is a minor impact from HR restructuring as well at the U.S. offshore. Last but not least, we have about 15 million of impact. We had some outdated equipment in warehouses, and basically we are just taking a view that this will not be used, or if we sell it, it will be sold at a discount. And that's about 15 million. So this is how we break it down.

And then on the run rate repowering, I think we can probably get that to you in the CMD maybe, because I think, I'm not sure we have that, information with us today.

OK, thank you.

Thanks.

Thank you. The next question comes from the line of Skye Landon from Rothschild. Skye, please go ahead.

Hi, thanks for the presentation. Firstly, on battery storage, now that you're doing more and more large-scale projects, both in the US and Europe, Since I saw a fairly large project in Spain on social media just the other day, I was just wondering if you could elaborate on the typical return profile that you're seeing in this market. And if possible, it'd be interesting to hear what you see as a typical kind of capex figure for storage projects, both in the US and Europe separately, and maybe how this is evolving. And secondly, just on asset rotation, I know it's been touched on already, but with the Greek asset sale today, it looks to me like at least 50% of the 0.1 billion gain guidance is locked in from the first 0.7 gigawatts. So with 1.3 gigawatts yet to sign, in theory, the 0.1 billion is quite achievable. Just wondering if you can elaborate on this a little bit more and what it potentially means for gains from the remaining 1.3.

So, um, sorry, the line wasn't super clear, so I'm not sure I totally got the question, but I think the first one you were talking about the storage and the CapEx, uh, for storage projects. Is that, is that right?

That's right. Sorry. If the line's not clear, um, returns and CapEx for storage projects.

Okay. So the storage projects are some of the most profitable projects that we are seeing at the moment, particularly in the U S with, um, typically double digits IRRs. On top of it, on a risk adjusted basis, even better because most of these are tolling agreements that we have for the storage projects. And so it's good returns with low risk. So very positive. In terms of CapEx, I mean, the data point I have here, but we can then double check it and get back to you, but it's around points. So what do you guys have? 3,000 euros per megawatt hour, all in capex. And just the blocks, 80,000 per megawatt hour. But listen, we can get that information more detailed offline. On the asset rotation, again, I didn't quite catch the question.

Yeah, so just wondering, I mean, with the Greek asset sale today, it looks to me like at least 50% of the 0.1 billion guidance is kind of locked in. So with another 1.3 gigawatts yet to go, in theory, the 0.1 billion guidance is pretty achievable. Just wondering if you could elaborate on how we should think about the remaining 1.3 gigawatts.

Yeah, so a big part of that additional gigawatts is the 49%. So those gains would not flow through the P&L. And so I'd say that the 0.1 billion euros of capital gains is achievable. I wouldn't want to guide you much above that because I say a big part of the volume still to be done is in the US, the 49% stake. And so that won't be contributing anything to the bottom line. Okay, thanks.

Thank you. The next question comes from the line of Jorge Guimarães from GB Capital. Jorge, please go ahead.

Good afternoon. I have two questions. The first one is related with the US and is if you are seeing any type of abnormal CapEx inflation as I assume there will be a run to install projects to benefit from the have them operating by the end of 2027 so the first one is on us capex and the the second one is you were related to its storage you were mentioning just answering to a question on storage what is your view about the the lack of still lack of legislation on storage in spain is it preventing you from deploying the opportunities or it simply matter that the spreads are not there and the UN agro basis prefer to work with the hydro pumping. Thank you very much.

Thank you. So on the capex, I mean, we're not seeing a lot of capex inflation. I mean, we've been locking in the EPCs and the equipment. And I think at the moment it's been relatively stable. We haven't seen sort of that, any type of inflation coming through. in the numbers or in the context that we've been having with suppliers. But that's obviously something to monitor. On the second one, yes, there is not a lot of investment going into batteries in neither Spain nor Portugal because of a lack of regulation. And we've been advocating for quite a long time now that There should be capacity payments. There should be additional ancillary services which would remunerate, for example, batteries for fast frequency response or other types of ancillary services. And so far, that legislation and regulation has still not come through. So what you're seeing is basically most players or very few players are actually moving forward with investment decisions in batteries. And so that's what I'd say. I think if the governments want to see additional batteries in Portugal and Spain, then they need to put in place the regulation and framework and incentives so that that actually gets done. I think Portugal and Spain have a very high penetration of renewables compared to other countries, but very low penetration and investments in batteries. It's true we have storage on the EDP side. It's not obviously on the EDPR side, but in any case, you know, when we look at storage where the business case is still not coming out under the current conditions.

Next question from the line of Olli from Deutsche Bank. Olli, please go ahead.

Thanks. Just one question for me, again, regarding the US. Just to get your thoughts on potentially the outlook for the return spreads are over whack that you think might be achievable when you think about what was in the table right after the big beautiful bill came out and then after the news around the executive order came because i'm wondering that if the safe harboring becomes more onerous that's more likely to impact smaller developers which would The upshot of that could be you have less supply from the renewable side in the market, the same demand, and that would make me think that there would be a better opportunity for you to potentially make even higher returns in that eventuality if you were not impacted nearly as much as the small developers. Is that the right way of thinking about it? Is there anything you can share on that? That would be great. Thank you.

Hi, Alex. I mean, yes, I think obviously a lot of players have taken out sort of, or put in place safe Harbor. And so they're now waiting like us to see what sort of the, the outcome is, or, you know, that comes out in August, those clarifications. I think certainly if it becomes a lot more onerous, as you're saying, I think a lot of people will drop a lot of those projects or a lot of those options. And so you, you might have that type of dynamic that you're talking about in any, but, I mean, there are a lot of options of safe harbor that people have put in. So I think a little bit of cleaning up would definitely be a good thing. So we're not super negative. I mean, I think we've typically been more prudent to the market. If it cleans up part of the rest of the market, I think that could be net positive for us. But let's wait and see what comes up.

Thanks very much. Thank you, Ollie. Going on to the last question from the line of Jenny Bing from Citi. Jenny, please go ahead.

Thanks very much. Two questions on the U.S. from me, please. Just firstly, you talk about the potential upside on PPA prices in the U.S., but if I look back, your PPA prices in the U.S. and the early parts in 2022 is in the low 40s. It's sort of got to the high 40s where we are today. So can you just talk a little bit about the dynamics of the contracts coming up for renewal? Obviously, there is the unhedged piece that will naturally benefit from the volatility of commodity prices. But just in terms of the hedged piece, is it right to think about sort of that similar trajectories in terms of how we should think about PPA prices as we go forward? assuming the $70 that you referred to earlier is sustainable. And then just secondly, talking about IR over WAC spreads, obviously the U.S. and given IRA, given OBRA, given tariffs, given everything else that's going on, are you guys thinking about the cost of capital for U.S. projects, i.e. to do business, is generally higher? Is that how you're thinking about it, or is it status quo as it was, and hence the 270, 300 bps that you can still achieve? Thank you.

Hi, Jenny. So in relation to your first question, if I got it, so in the past, there were lower-priced PPAs, obviously, you know, sort of re-increase in cost of debt and sort of the inflation. those PPA prices have now gone up and we're doing sort of PPAs and we're seeing them sort of relatively stable, sort of in the high 60s, low 70s in the key markets. Or the PPAs that are rolling off and where they're moving to merchant and where we are having to hedge sort of in the market, we are seeing those market or those merchant prices and capacity payments moving up. And so I gave you that data point, for example, in PJM. So those are for slightly older projects that typically we'll have a higher merchant component or the PPA will have run out. There you are seeing the higher prices flowing through and so higher hedged prices. But for the new projects that we do, we always do them with PPAs and those are the PPA reference prices that we're seeing. In relation to the second question, I mean, the way we look at our cost of capital and our WAC, I mean, it's very traditional sort of cap-hem type. So we'll look at the cost of debt. Where's the cost of debt? 10 years in the U.S., we'll look at the cost of tax equity, look at the cost of equity that we're assuming for the U.S., and we'll just build up our cost of capital based on that. So to the extent, you know, so we will be factoring obviously where interest rates are and where we think that sort of the risk premiums are, the market risk premiums, but we don't sort of take into account other types of factors like whether, you know, IRA or big beautiful bills or other factors. We assume that those are incorporated into into these numbers that I just talked about. Does that make sense? And maybe, I don't know, Hui, if you want to compliment here. I don't know, Jenny, was that relatively clear or was there something you wanted me to elaborate on?

Yeah, no, I was just more thinking about the risk premium element. Has that expanded given the volatile nature of announcements that come through and the unpredictability of U.S., whether you've built some tolerance into your spreads effectively.

What we do, so a couple of points. First, when we are pricing the PPAs, we're also obviously looking at where are the, you know, where's the CapEx? What are our long-term energy price curves assuming? And that's how we're pricing it. So we're not looking sort of at the short-term volatility and taking a position on that. We're sort of just figuring out where we think that sort of the returns versus our cost of capital is. Yeah. So we're not necessarily, the unpredictability I think gets factored out by the fact that if we are locking in the PPA and the CapEx and sort of all these different variables, you can essentially eliminate then that, unpredictability going forward. I mean, once the project is locked in and built, then, you know, we assume no retroactive effects, et cetera. And for new projects, as they come along, we're obviously constantly repricing them to take into account whatever, you know, is the latest information that we have from the market and from any decrees that come along or sort of any executive orders, et cetera.

Okay. Thank you very much.

The only thing, Yeah, the only thing I would add, Jen, is bear in mind that for the current PPA negotiations and tariff, you know, the reciprocal tariffs and tariffs has been a topic in the U.S. What we have been doing is either including a wording that protects us against tariff changes in the PPAs, or else we locked it in through the supply chain. And therefore, this type of more short-term uncertainty in the U.S., we also don't get it. I mean, that's why we don't include it into act, because we protect it through the contracts.

Okay, perfect. Thank you.

Thank you, Jenny. So this concludes the Q&A session. Some final words?

I mean, just first, I think, as I mentioned, good, solid first half, but also very importantly, I think we're looking forward to a solid second half as well. Good line of sight to the capacity, good line of sight to the asset rotation, good line of sight also to the 26 numbers. So I think we've cleaned up a lot of issues that we had sort of in previous years or even in previous quarters. And so I think you're seeing much cleaner, sort of more stable recurring numbers and obviously the additional stability in the market and the visibility that we have now in the US and in Europe is obviously helping towards that. So looking forward to coming back in the third quarter to talk about the third quarter numbers, to look at the overall guidance then for the rest of the year and obviously to then talk about also the the prospects going forward for 26 and beyond, you know, the capital markets there. So looking forward to that. And I hope if you get some holidays now in the next couple of weeks, enjoy it. And I'm sure we'll be talking again in September. Thank you.